From Volume 7, Issue 47 of EIR Online, Published Nov. 18, 2008

U.S. Economic/Financial News

LaRouche to Chicago: 'You Had the Party, Now You Get the Hangover'

Nov. 13 (EIRNS)—Chicago's Mayor Richard Daley told the press this week that CEOs of area businesses have informed him that they will implement mass layoffs beginning this month, through the New Year. "We never experienced anything like this except people who came from the Depression," he said. "When you have that many layoffs early—and they're telling me this is only the beginning of their layoffs—that is very frightening." On Nov. 19, the Chicago City Council will meet on budget cuts, including layoffs of city workers. Yesterday, the mayor met with gas company officials, on contingency plans to try to prevent home heating cut-offs.

Chicago was home to the 100,000-person Nov. 4 Obama victory rally. Now they are celebrating the election with layoffs. Lyndon LaRouche said, "You had the party, now you get the hangover."

Other cities and states are in a downward spiral of crises. The Detroit City Council passed a resolution Nov. 12, calling for a $10 billion Federal bailout for the city. The resolution calls for using the money for public service employment, to fund mass transit, and to place a two-year moratorium on home foreclosures.

New York Gov. David Paterson yesterday announced $2 billion in spending cuts, with the biggest in public schools and health care for the poor. The excuse is to reduce the deficit. A special state legislative session is called for next week.

New Victims of the Monetarist Plague

Nov. 10 (EIRNS)—In addition to insurance giant AIG, new terminal cases have been added to the list of ailing companies:

Fannie Mae, in its first report since receiving a government guarantee of support, announced $29 billion losses. The losses include $21.4 billion in write-downs on held mortgages, increases in reserve funds for future losses, and a reduction in "deferred tax assets," which "cut its book value by about half." So far Fannie has not tapped government bailout money, but expects to need it in January, '09. However, if Freddie Mac follows Fannie, its write-off would be $18 billion, and its book value would be negative $6 billion, triggering government money this month.

GM stock plummeted as much as 31% and moved toward its lowest level in 62 years, after a Deutsche Bank downgrade of its debt; press accounts added that GM shares may be worthless in a year. GM stock has dropped 90% this year, from over $30/share to just $3/share today. In an editorial, the Wall Street Journal argued against a bailout, essentially saying "that money is ours!"

Circuit City, the nation's second-largest consumer electronics store, today filed for Chapter 11 bankruptcy. During the 1980s, its sales had gone from $250 million to over $1 billion. Less than 12 months ago, it was doing so well that Blockbuster Video made a takeover offer (which was pulled in July). Its filing now, just before the holiday season, will allow it to keep the shelves stocked, by assuring vendors they will be paid.

* Peter Peterson's Blackstone Group lost a half billion dollars in the third quarter.

* The Financial Times is reporting that Wall Street faces job losses of 70,000, as "consolidation" creates "redundancies" within downsized companies. This comes on top of an already reported 150,000 financial sector pink slips worldwide, already this year.

Little Dictator of New York: Bridge Tolls and Bag Taxes

Nov. 9 (EIRNS)—The administration of New York City's own Mussolini, Mayor Michael Bloomberg, trying to cope with an ever-increasing deficit of the Metropolitan Transportation Authority, is proposing that tolls be levied at four city bridges which are currently free. These are not tolls to retire debt contracted for their construction: two of the four bridges are more than 100 years old, and the other two celebrate their centenary next year! The idea is to fleece commuters for a cool $1 billion. If the plan encounters too much resistance, tolls may be levied just during rush hours, like the Bloomberg-proposed, and defeated, congestion tax, WCBS-TV reports.

The city is also considering a 5 cent charge on plastic grocery bags, to raise revenues, and "help the environment."

Auto Industry Death-Spiral; No Cheap Tricks Will Work

Nov. 13 (EIRNS)—Chrysler CEO Bob Nardelli said today at a California conference that his company, owned by buyout vulture Cerberus Capital Management LP, must have Federal aid to survive. How much it might get "has yet to be determined," Nardelli said. Chrysler, Ford, and General Motors have asked for $25 billion, to be split among them. Meanwhile, Goldman Sachs today suspended its rating of GM, saying that GM alone needs a $22 billion bailout to survive. J.P. Morgan Chase cut its GM rating to "neutral" from "overweight," and said the automaker needs "something immediately" to make it through the end of the year.

Even with aid, the Big Three auto producers are not going to survive, under present policies that refuse to address the crisis. The potential to revive the U.S. auto industry and manufacturing base was finished in February 2006, when the Democratic Party refused to deal with the crisis as Lyndon LaRouche proposed at the time. These companies today are not going to be saved by cheap tricks.

Nevertheless, the maneuverings for cheap tricks are in high gear. President-elect Barack Obama and the Congressional Democrats are pushing for a $25 billion bailout for the auto companies. Obama says Congress should pass up to $50 billion. The White House is sending out mixed signals. It was a topic at the Obama-Bush meeting there earlier this week. Now, where the funds are to come from is in dispute. Treasury Secretary Henry Paulson said on Bloomberg TV today, that the Administration opposes the Democrats' plan to take the rescue money out of the original $700 billion bank-bailout package, because that is reserved for financial institutions (which he re-defines every day). Paulson said that Congress has the option to revise a law authorizing $25 billion to help automakers retool for more fuel-efficient vehicles, making the money available more quickly to bolster their liquidity. But the Democrats oppose it.

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